Engro Polymer & Chemicals (EPCL) has announced that the basic engineering study is under process for de-bottlenecking of VCM production facility to 300K MT from the existing 254K MT. It may be mentioned here that EPCL announced 2Q2022 earnings today, where company recorded earnings of Rs2.57/share down 25% YoY and 50% QoQ. Along with the result company announced dividend of Rs2.5/share, taking 1H2022 DPS to Rs7.5/share.

EPCL recorded super tax of Rs1,600mn and Rs393mn for 2021 and 1H2022 earnings respectively in 2Q2022.

• Global PVC prices remained on a downward trajectory during 2Q2022 amidst lockdown in China and India due to monsoon season. Ethylene prices remained soft during 2Q2022 due to bearish oil/naphtha outlook, and well supplied markets.
• That said, PVC-Ethylene core delta averaged at US$850/MT during 2Q2022 compared to US$973/MT during 1Q2022. Currently PVC-Ethylene core delta is hovering around US$550/MT. Management expects PVC-Core delta to remain stable in short term.
• Ethylene di Chloride (EDC) prices averaged at US$600/ton during 2Q2022.
• High Temperature Direct Chlorination HTDC (energy efficiency project) and Hydrogen Per Oxide project is on track and expected to come online in 2023.
• EPCL’s PVC sales were up by 34% YoY while 7% QoQ to 62.5k MT in 2Q2022. The QoQ decline is due to Ramzan and Eid holidays. To highlight, 57% of PVC demand is diverted towards pipe & fittings category. The company also exported 0.9 KT during 2Q2022.
• As per management, significant rupee devaluation, rising interest rates, and inflationary environment might impact the market sentiment which could ultimately lead to slow down in domestic demand. Management expect PVC domestic demand is expected to grow at annual CAGR 4-5%.
• The company’s caustic sales were down by 22% YoY and 7% QoQ to 14k tons in 2Q2022 due to unavailability of product due to gas curtailment.

   

  Courtesy – Topline Securities